July 1, 2008
SEM Tip – Don’t Get Hung Up on Click-Through-Rates
SEM Tip #1
When it comes to managing a search engine marketing (SEM) campaign online in Google AdWords or one of the other search marketing programs, too many businesses get carried away with click-through-rates (CTR).
But before I get into why click-through rates (CTR) are overrated, let’s just clarify what a CTR is. A Click-Through-Rate, or CTR, is a measure of the percentage of people who click on your ad after viewing it.
Typical CTR’s are often well below 1% for most online campaigns, but what is it about them that as soon as they reach 2-3% everyone starts giving each other high-fives even when sales are not affected? So let’s go through the pros and cons of CTRs.
Firstly, CTR’s can be used as a guide to how effective your ad text is. Quite often, the more appealing your ad text is, the higher your CTR will be. But what if you’re in a very specific industry, say ‘neon lighting Brisbane.’ As part of your campaign it would be perfectly normal to include broader keywords such a ‘Brisbane lighting’ in the hope that people who search for lighting in Brisbane will be then interested in neon lighting. However, this is where your CTR can be misleading.
For instance, say my headline for the ad is ‘Brisbane Lighting’ – A large majority of users who have searched “Brisbane lighting” might think this is a relevant ad, so I get a higher CTR. The problem is that they click on the ad, bumping up my CTR and costing me money, only to find when they get to the site that I only sell neon lights. This is a waste…but my CTR looks good right?
On the other side of the coin, if my headline for the ad is ‘Brisbane Neon Lighting,’ all those users who have searched for “Brisbane lighting” will see my ad but only those who are interested in neon lighting will click on it. This means that I get a lower CTR but in this case that’s actually a good thing as I get better quality traffic.
Now, it is well publicised that Google, when ranking ads, don’t just take into account how much you bid, but also your quality score. One of the things that makes up the quality score is your CTR. However, your quality score is unique to each separate keyword, so having a low CTR on a broad term such as ‘Brisbane lighting’ does not affect your quality score on your more targeted keywords such as ‘Brisbane neon lighting,’ so there’s no real advantage to CTR there.
The other downside of having a high CTR is that you use up your advertising budget very quickly. A low CTR has the added advantage of giving you great exposure, as you get more impressions on your ads before your budget is used up. This helps immensely with brand recognition.
So at the end of all this you may be wondering if I can’t trust CTR, what can I trust? Some people put their faith in conversion rates, but this again has many of the same pitfalls. The best statistic to track is cost-per-conversion, which details how much it costs per sale or lead. This is done by the insertion of a snippet of HTML code on your ‘Thankyou for Purchasing’ (or likewise) page. A professional SEM management company can set your business up a conversion tracking AdWords account and manage it throughout the course of a campaign, continually adjusting all facets of the campaign for best performance.
I guess the key thing to take from this today is that when it comes to your online marketing campaigns, don’t worry too much about the percentages; but look at the dollar amounts that it is costing your business per sale to advertise online.